Invitation to the General Meeting 2017

Transcription

1 Arrival BKW GROUP Invitation to the General Meeting 2017 Kursaal Bern, Kornhausstrasse 3, 3013 Bern Arriving by public transport and tickets From the Bern main railway station, take the number 9 tram in the direction of Wankdorf Bahnhof until reaching the Kursaal stop. The tram runs every 10 minutes and the journey takes around 5 minutes. Tickets This invitation will entitle the bearer to travel on Friday 12 May 2017 in the Libero zones 100 and 101 (return ticket, 2 nd class). (2) (V) (SPEZ) (12) Arriving by car Motorway exit «Bern-Wankdorf» Straight ahead, following signs for «Zentrum» (Centre) on Papiermühlestrasse Take the right-hand lane and at the third intersection turn right into Viktoriastrasse (Hotel Allegro/Kursaal are signposted) At Viktoriaplatz turn left into Kornhausstrasse The Kursaal is located on the right-hand side (GPS: N/ E) As car parking at the Kursaal Bern is limited, we recommend that you use public transportation. Map to General Meeting Wankdorf motorway exit Bern railway station 9 Tram Lorrainebrücke Kursaal Bern P^ Kornhausbrücke Federal Palace Viktoriaplatz Viktoriastrasse Kursaal tram stop Zytglogge Minster Papiermühlestrasse BKW AG Viktoriaplatz 2 CH-3013 Bern Tel

2 Table of Contents 2 Agenda and Motions Proposed by the Board of Directors 4 Letter to Shareholders 6 Review of the 2016 Results 14 BKW Group Consolidated Financial Statements 24 Financial Statements of BKW AG 28 Remuneration Report 40 Profiles of Candidates to the Board of Directors 42 Independent Proxy and Auditor 43 Organisational Information

3 Dear Shareholder On behalf of the Board of Directors and the Group Executive Board, I cordially invite you to this year s General Meeting of BKW AG. Friday, 12 May 2017 Kursaal Bern, Kornhausstrasse 3, 3013 Bern 1 pm Doors open 2 pm Commencement of the General Meeting 4 pm Buffet This brochure contains the agenda and extracts from the BKW Annual Report 2016 related to specific agenda items. For your convenience, you will find a reference to the relevant document next to each agenda item; it is no longer necessary to search through the Annual Report. For details of registration and the General Meeting proceedings, please refer to the organisational information at the end of the brochure. Please register by 28 April Many thanks. Yours sincerely, Urs Gasche Chairman of the Board

4 2 GM 2017 INVITATION Agenda and Motions Proposed by the Board of Directors 1. Approval of the Management Report, the consolidated financial statements and financial statements for 2016 The Board of Directors proposes that the Management Report, the consolidated financial statements on p. 14 et seq. and the financial statements on p. 24 et seq. for 2016 be approved. 2. Advisory vote on the Remuneration Report 2016 The Board of Directors proposes assenting note of the Remuneration Report 2016 on p. 28 et seq. 3. Granting of full discharge to the Board of Directors The Board of Directors proposes that the members of the Board of Directors be granted discharge in respect of the 2016 financial year. 4. Appropriation of retained earnings 2016 The Board of Directors proposes that the retained earnings be appropriated as follows: CHF Dividends of CHF 1.60 per eligible share 1 78,903, 966 Balance carried forward 210,319, 846 Total 289,223, Dividends are not paid on shares held by BKW AG. The number of shares that are entitled to receive a dividend at the time of preparation of the financial statements is 49,314,979. The last trading day on which a right to receive dividends is granted is 15 May. As of 16 May, the shares will be traded ex-dividend. If all shares were entitled to dividends, the dividend payment would be CHF 84,480,000 and the amount carried forward would be CHF 204,743,812. If the General Meeting approves this proposal for the appropriation of retained earnings, the dividend of CHF 1.60 per share minus 35 % withholding tax, i.e. CHF 1.04 net per share, will be paid free from expenses on or after 18 May Approval of the maximum remuneration to be paid to members of the Board of Directors and the Group Executive Board during the remuneration period 2017/2018 a) Remuneration of the Board of Directors The Board of Directors proposes that the total maximum remuneration payable to the Board of Directors for the year 2017/2018 of CHF 1.5 million be approved. The proposed maximum remuneration is based on the following assumptions: Component Total (CHF thousands) Fixed remuneration 900 Attendance allowance 200 Share-based remuneration 100 Other remuneration 300 Total 1,500 b) Remuneration for the Group Executive Board The Board of Directors proposes that the total maximum remuneration payable to the Group Executive Board for the financial year (calendar year) 2018 of CHF 8 million be approved. The proposed maximum remuneration is based on the following assumptions: Component Total (CHF thousands) Fixed remuneration 3,600 Short-term variable remuneration (maximum) 800 Long-term profit sharing (sharebased remuneration) 1,400 Pension payments 2,200 Total 8,000

5 GM 2017 INVITATION AGENDA AND MOTIONS 3 6. Elections a) Board of Directors (cf. profiles on p. 40 et seq.) In respect of the next legal term of office, i.e. until the 2018 General Meeting, the Board of Directors proposes that the following existing members be individually re-elected to the Board of Directors: Urs Gasche, Hartmut Geldmacher, Marc-Alain Affolter, Georges Bindschedler, Kurt Schär, Roger Baillod The Annual Report can also be found online: b) Chairman of the Board of Directors The Board of Directors proposes that Urs Gasche be re-elected as Chairman of the Board of Directors for the next legal term of office i.e. until conclusion of the 2018 General Meeting. c) Nomination and Remuneration Committee The Board of Directors proposes that the following members be individually re-elected to the Nomination and Remuneration Committee for the next legal term of office i.e. until conclusion of the 2018 General Meeting: Urs Gasche, Barbara Egger-Jenzer and Georges Bindschedler. d) Independent proxy (p. 42) The Board of Directors proposes the election of Andreas Byland, Notary, Bern, as independent proxy for the next legal term of office i.e. until conclusion of the 2018 General Meeting. e) Auditors (p. 42) The Board of Directors proposes that Ernst & Young Ltd be re-appointed as auditors for the 2017 financial year.

6 4 G M I N V I TAT I O N Letter to Shareholders Dear Shareholders, Once again, the BKW Group1 can look back on a successful financial year. This was by no means a given, as we continue to operate in a highly challenging environment. Our earnings from traditional electricity production were CHF 150 million lower than in However, we succeeded in offsetting two-thirds of this decline in the energy business thanks to excellent management of our electricity portfolio and further cost reductions. The focus in the last year has thus been on further reducing financial risks, eliminating uncertainty and cutting costs. And this focus paid off. Expansion of service business progressing For three years now, we have consistently pursued our three-pillar strategy of strengthening energy, developing networks and expanding services. BKW s transformation is proceeding apace. The service business is growing strongly: last year was the first in which we broke through the CHF 500 million revenue barrier and contributed over CHF 30 million to the operating result. GV-Einladung_en 4 The goal is to build up the service business in the coming years to a point where it becomes one of the main pillars of the BKW portfolio. That s why BKW is growing so strongly. This is also re flected in our employee figures: in the last 12 months, our staff numbers have grown by 25 percent to over 5,000. Some two-thirds of our employees now work outside the traditional energy and grid business. Expansion of engineering skills to international network While we were focused on the field of building technology in Switzerland, we are also expanding our engineering skills in Germany, Austria and Switzerland, wherever there is a particularly pressing need for investment in regeneration, expan sion and maintenance of the energy, water and transport infrastructure. Our acquisition of engineering companies gives our customers access to a strong engineering network so that they benefit from wide-ranging expertise for the comprehensive planning of challenging projects. 1 The BKW Group comprises BKW AG and its Group com panies. In order to make this report easier to read, the Group will be re ferred to as BKW. Where the text relates specifically to BKW AG or BKW Energie AG, this is expressly mentioned :21:40

7 GM 2017 INVITATION LETTER TO SHAREHOLDERS 5 Buildings become power plants Almost half of all energy in Switzerland is consumed by buildings. There is major potential here in the area of energy efficiency and intelligent usage. The intelligent connection of photovoltaic plants with heaters, water heaters, battery stor - age and electric cars will become more widespread. The house will become an integral component of the energy supply system. Here, with our network of building technology specialists through - out Switzerland, we can offer truly integrated ser - vices from planning and implementation through to maintenance and servicing. We have thus further strengthened the areas of building technology planning and implementation in 2016 and now play an important role in the Swiss building technol ogy sector. With each company acquisition, we gain additional skills and build on existing expertise and our customers benefit from this too. Further expansion of renewable energies Of course, we remain committed to our core business of electricity production, distribution and sales. We are strengthening our energy business in order to profit from a future market recovery. In 2016 alone we completed and launched four small hydroelectric plants. In Norway, we are involved with Europe s largest on-shore wind farm project to date. Moreover, for Switzerland s largest wind farm, Mont-Crosin, we replaced the four oldest machines with new, significantly more powerful models that soon set a new production record. And in November we expanded our wind farm port folio in France. We are actively positioning ourselves to face the new challenges in the energy markets, and in trading, too, we are focusing increasingly on services for third parties such as direct marketing for electricity from renewable energies. Grid: the steady revenue stream The grid business is a stabilising factor for BKW. By increasing our investment in the national grid company Swissgrid, we have managed to fur ther increase this stability. Through additional share purchases, we have now become the largest Swissgrid shareholder and secured our returns from the grid business over the long term. A big thank-you We would like to thank our managers and employees for their outstanding commitment, and we look forward to counting on their expertise and capaci ty for change as we drive our strategy forward. We thank our shareholders and customers for their trust in us, and our suppliers and part -ners for the professional, enjoyable collaboration. They you have all made significant contributions to our com - pany s success. Together, we will also shape the future of energy in 2017 straight forward, reliable and networked as we continue to develop our company into one of the leading energy and infrastructure service companies. Kind regards, Urs Gasche Chairman of the Board Suzanne Thoma CEO

8 6 GM 2017 INVITATION REVIEW OF THE 2016 RESULTS BKW increases operating revenue and profit The BKW Group achieved highly positive results in the 2016 financial year in an industry environment that remained challenging. The total operating revenue grew by 8 % to CHF 2,862 million, with the net profit rising disproportionately by 13 % to CHF 322 million. The Services business, which once again underwent significant expansion, and the high revenues from the Grid business more than offset the negative effects of electricity prices. With its 2016 financial result, BKW has once again proved the robustness of its business model. Services and Grid business areas contribute to higher total operating revenue At CHF million, the total operating revenue was 8 % higher than the previous year s figure. The Services segment, which is continuing to grow, improved its total operating revenue by 31 % to CHF 565 million. With this, BKW broke the half-billion CHF barrier for revenue in this segment for the first time. The expansion in the Services business went a long way towards compensating for the drop in revenue from the Energy business caused by lower electricity prices. Lower electricity prices had a negative effect on Energy business revenues in the order of CHF 150 million. Successful management of the energy position, acquisitions as well as higher revenues from commodities reduced the decline in total operating revenue in Energy to 5 %, or CHF 84 million. In the Grid business, the price rises applied as well as the expropriation compensation from Swissgrid contributed to growth of 2 1 % to reach CHF 925 million. Strong operational EBIT: negative effects of electricity prices successfully offset The consistent on-going implementation of strategy led to strong results for the 2016 financial year. BKW successfully offset the negative influence of low electricity prices and increased its reported operating profit (EBIT) to CHF 384 million. This EBIT includes a one-off positive effect in the amount of CHF 38 million. This resulted from the expropriation compensation for the BKW transmission system transferred to Swissgrid in Adjusted for one-off effects, the EBIT increased from CHF 309 million in 2015 to CHF 346 million. With a markedly higher contribution from solid growth in the service business, fee increases in the distribution system, continued successful management of the energy position along with cost reduction, BKW managed to more than offset lower electricity prices. Further reduction of operating costs in organic business Consistent cost management once again reduced operating costs in organic business (overheads) from the previous year, this time by CHF 20 million. Operating costs nonetheless increased by CHF 104 million to CHF 953 million due to acquisitions. By the end of 2016, BKW employed a total staff of 5,007 (full-time equivalent), representing an increase of more than 1,000 over the previous year. The Service business accounted for two thirds of this growth.

9 GM 2017 INVITATION REVIEW OF THE 2016 RESULTS 7 Net profit increases by 13 % At CHF 322 million, the reported net profit is 13 % higher than in the previous year. Adjusted for one-off effects such as the disposal of participations in Group E and Romande Energie as well as the expropriation compensation from Swissgrid, the net profit for 2016 was 5 % higher than the comparable figure for the previous year. This rise is based on the increased operating profit as well as a significantly improved financial result. The financial result was offset in the reporting year following the significant financial expenses of CHF million in the previous year. This is attributable largely to the performance of the Decommissioning and Waste Disposal Fund. While the fund recorded a loss of CHF 5 million in the same period last year, both funds achieved returns of 6 % in 2016, representing a profit of CHF 61 million. In 2016, BKW also achieved a one-off profit of CHF 53 million from the dis posal of its non-strategic participations in Groupe E and Romande Energie S.A. Income tax expense amounted to CHF 61 million, a full CHF 70 million higher than the previous year when various one-off effects combined to produce a highly positive tax effect, resulting in net tax revenues of CHF 9 million. The effective tax rate for the 2016 financial year amounted to 16 %, which was below the normalised rate of 22 %, a difference primarily driven by tax-privileged revenue from sales of participations. CHF millions % change Total operating revenue 2, , % Energy procurement/transport 1, ,327.4 Operating costs Operating profit before depreciation, amortisation and impairment % Depreciation, amortisation and impairment Income from associates Operating profit/loss % Financial result Profit/loss before income taxes % Income taxes Net profit %

10 8 GM 2017 INVITATION REVIEW OF THE 2016 RESULTS Strengthened Energy business manages to offset the negative electricity price effect The Energy business builds, operates and maintains BKW s pool of power plants in Switzerland and abroad. It is also responsible for the sale of energy in Switzerland and Italy and for trading in electricity, certificates and raw materials. CHF millions % change Electricity sales Switzerland Electricity sales International Other electricity sales Income from other energy business Other operating income and own work capitalised Total operating revenue 1, , % Energy procurement Expense from other energy business Operating costs Operating profit before depreciation, amortisation and impairment % Depreciation, amortisation and impairment Income from associates Operating profit/loss % As expected, total operating revenue for the Energy business declined in 2016 due to lower electricity prices, falling by 5 % to CHF 1,481 million. Lower electricity prices in the partially regulated Swiss distribution business resulted in a 3 % drop in revenue to CHF 500 million despite increased sales volumes from independent customers of 0.5 TWh. There was also a slight decline in earnings performance in the international distribution business. Although higher volumes were achieved (+ 0.2 TWh), price effects brought revenues down by 5 %. Lower prices also brought down other electricity sales (market sales and direct sales from power plants). Overall, BKW sold 21.5 TWh of energy across the various sales channels. It is faced with a total negative price effect of around CHF 150 million. The reported EBIT amounted to CHF 136 million. The Energy business thus lost 48 % or CHF 126 million over the previous year. For the operating result (without one-off effects), the decrease amounted to CHF 53 million from the previous year. This development is hardly surprising given the known negative impact of electricity prices and could in fact have been far more pronounced. Thanks to optimal management of the energy position, lower generation costs from partner plants and a further reduction in operating costs in the organic business, around two thirds of this negative electricity price influence was offset a truly outstanding achievement.

11 GM 2017 INVITATION REVIEW OF THE 2016 RESULTS 9 At 11.2 TWh, overall electricity production was 5 % below the previous year s figures. The fossil-fuel power plants produced 1.4 TWh, significantly more than the previous period (1.1 TWh). Market conditions are seeing power plants in Italy, in particular, contribute higher volumes. The coal power station in Wilhelmshaven only began commercial operations in the fourth quarter of the previous year. Production volumes from hydroelectric plants was down by 0.4 TWh, the primary cause being lower volumes from storage power stations. Production volumes from new renewable energies, on the other hand, were slightly higher than the previous year s levels, at 0.9 TWh. Electricity generation from nuclear power stations was 0.6 TWh lower than the previous year due to the extended outage of the Leibstadt plant. The energy procurement cost fell by 2 % to CHF 888 million. This includes the partial release of the provision for onerous energy procurement contracts for the gas power plant in Livorno Ferraris in the amount of CHF 28 million. The majority shareholder of the power plant posted a depreciation for the facility in the 2016 financial year, which will bring down future generation costs. For BKW, this resulted in the partial release of provisions on the one hand, but a negative effect in the same amount on income from associates on the other. Because the previous year s figures also contained a one-off effect (currency conversion on provisions in the amount of CHF 45 million), energy procurement costs fell by CHF 37 million excluding one-off effects. In addition to lower market procurement prices and somewhat lower volumes, reduction in production costs of partner plants had a particularly positive effect. Thanks to improvements in efficiency and cost savings, operating costs fell by 4 % or CHF 14 million, despite the entry of new acquisitions AEK Group and WET Wind Energy Trading. Reduction in organic business amounted to 5 %. Income from associates was negative, at CHF 4 million (previous year CHF + 49 million). This was caused by the depreciation on power plant facilities in the financial statements of EP Produzione Livorno Ferraris (CHF 28 million). The previous year s high figures included a one-off effect from the claims for damages in connection with the coal power plant in Wilhelmshaven (CHF + 28 million).

12 10 GM 2017 INVITATION REVIEW OF THE 2016 RESULTS Markedly higher contribution from the Grid business The Grid segment builds, operates, maintains and develops BKW s distribution grid. It is also responsible for the transport of energy for end customers outside BKW s supply region in Switzerland and Italy. CHF millions % change Distribution grid usage fees Energy transport income Other operating income and own work capitalised Total operating revenue % Energy transport expense Operating costs Operating profit before depreciation, amortisation and impairment % Depreciation, amortisation and impairment Income from associates Operating profit/loss % In 2016, the Grid segment improved its total operating revenue by 21 % to CHF 925 million. Income from grid usage increased by CHF 86 million to CHF 531 million. This can be attributed above all to previously announced fee increases as well as the the passing on of charges and costs for distribution grid. The energy transport income position relates to transport for end customers outside of the BKW supply region. The growth of this revenue is primarily attributable to increased transport volumes in Italy. Other operating revenue includes the one-off expropriation compensation from Swissgrid in the amount of CHF 38 million. Even without this one-off effect, total operating revenue in the Grid business grew by 16 % or CHF 125 million. Around 35 % of this revenue growth can be attributable to passed-on third-party costs. Fee increases meant that the Grid business was able to make a bigger contribution to the overall result, as anticipated. Along with the award of the expropriation compensation, BKW also realised a gain with the acquisition in connection with the AEK Group.

13 GM 2017 INVITATION REVIEW OF THE 2016 RESULTS 11 Significant contribution from a Services business currently marked by accelerated expansion The growing business area of Services primarily encompasses the fields of building technology, infrastructure engineering and grid. It also covers BKW competencies in the wind and solar services area, and in energy efficiency. CHF millions % change Income from services Other operating income Total operating revenue % Operating costs Operating profit before depreciation, amortisation and impairment % Depreciation, amortisation and impairment Income from associates Operating profit/loss % Revenue for the Services business increased markedly, as it also did last year. With a growth rate of 31 %, BKW realised Services revenues of more than half a billion Swiss francs for the first time in Every strategic Services field contributed to this increase in total operating revenue to an overall CHF 565 million. This growth was primarily achieved through acquisitive means, with the purchase of 18 companies. BKW emphasised its geographical and vertically integrated presence as a national service provider in the area of building technologies with acquisitions in Zurich and central Switzerland. The company acquisitions in the infrastructure engineering business took place not only in Switzerland but also, to an increasing extent, in Germany, including the prestigious engineering company Lindschulte Group from the north of the country. Acquisitions in the grid services business area were focussed on Switzerland. The strategy of achieving growth through acquisition of selected companies is now reflected in a significant contribution to results. Despite the costs of acquisition and integration, there was once again a disproportionate rise in the operating profit. This increase amounted to a highly gratifying 82 %, coming after a 50 % increase the previous year. This helped to increase the EBIT margin to 6 % from 4 % in the previous year.

14 12 GM 2017 INVITATION REVIEW OF THE 2016 RESULTS Solid cash inflow from operations once again In the reporting year, BKW achieved a cash inflow from operational business activities of CHF 358 million. This may be a little over CHF 200 million less than last year s record amount, but that result was driven by a major reduction in net working capital that is difficult to reproduce. The increase in net working capital in the 2016 financial year is distinguished largely by the claim from the expropriation compensation from Swissgrid for the transfer of the BKW transmission system. The associated payment in the amount of CHF 45 million was made in January Before the change in net working capital and income taxes paid (funds from operations), BKW managed a cash inflow of CHF 486 million, a marked increase of CHF 76 million over the previous year. Despite increased acquisition and investment activity with a capital outlay of around CHF 700 million, short-term liquidity, including current financial assets, amounted to CHF 1.2 billion at the close of the year (previous year: CHF 1.4 billion). Equity and financing situation: financial and operational flexibility maintained The balance sheet total rose by 7 % over the previous year to around CHF 8.6 billion. On the asset side, fixed assets in particular experienced a solid increase due to acquisition and investment activity. At CHF 2.9 billion, equity is around 14 % higher than in the previous year. Thanks to the strong annual result (despite the higher balance sheet total), the equity ratio increased by 2 percentage points to 34 %. CHF millions Current assets 2, ,400.5 Non-current assets 5, ,181.0 Current liabilities ,089.2 Non-current liabilities 4, ,551.4 Shareholders equity 2, ,940.9 Balance sheet total 8, ,581.5 BKW s financing situation remains solid. Increased acquisition and investment activity caused net debt (financial liabilities less current financial assets and cash and cash equivalents) to increase by CHF 147 million to CHF 439 million at year-end, although this remains at a low level. Conversions reduced convertible bonds included under financial liabilities by around CHF 30 million to CHF 129 million. Further conversions followed in the first few months of the new year. The first refinancing of outstanding bonds (nominal value CHF 150 million) is due in In addition, BKW maintains an unused syndicated loan of CHF 250 million. The financial framework for maintaining financial and operational flexibility therefore remains solid.

15 GM 2017 INVITATION REVIEW OF THE 2016 RESULTS 13 Stable dividend A dividend of CHF 1.60 unchanged from the previous year will be proposed to the General Meeting on 12 May This makes the dividend yield an attractive 3.2 %, based on the year-end share price. This puts the payout ratio at around 45 % of net profit, adjusted for one-off items. Outlook The 2017 financial year will be marked by further falls in electricity prices. BKW will strive to offset this negative influence through active management of its energy position and continuing with its policy of consistent cost management. The Grid business will develop steadily and will once again represent a key revenue stream. The rapid expansion of the Services business will continue in the 2017 financial year, and we can expect its contribution to the operating profit to increase further. BKW expects the operating profit in 2017 (excluding exceptional items) to be in line with that achieved in 2016.

16 14 GM 2017 INVITATION BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS Consolidated Income Statement CHF millions Net sales 7 2, ,664.7 Own work capitalised Other operating income Total operating revenue 2, ,861.6 Energy procurement/transport 8 1, ,327.4 Material and third-party services Personnel expenses Other operating expenses Total operating expenses Note , ,280.4 Operating profit before depreciation, amortisation and impairment Depreciation, amortisation and impairment Income from associates Operating profit/loss Financial income Financial expenses Profit/loss before income taxes Income taxes Net profit attributable to: BKW shareholders Non-controlling interests Earnings per share in CHF (undiluted) Earnings per share in CHF (diluted)

17 GM 2017 INVITATION BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS 15 BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Comprehensive Income Note Net profit Actuarial gains/losses (Group companies) 25 Actuarial gains/losses Income taxes Actuarial gains/losses (associates) 19 Actuarial gains/losses Income taxes Total items that will not be reclassified to income statement, net of tax Currency translations 27 Currency translations Income taxes Available-for-sale financial assets Value adjustments Reclassification to the income statement Income taxes Hedging transactions 27 Value adjustments Reclassification to the income statement Income taxes Total items that may be reclassified to income statement, net of tax Other comprehensive income Comprehensive income attributable to: BKW shareholders Non-controlling interests

18 16 GM 2017 INVITATION BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheet CHF millions Note Assets Cash and cash equivalents Trade accounts receivable and other receivables Current tax receivables Financial assets Derivatives Inventories Prepaid expenses and accrued income Total current assets 2, ,400.5 Financial assets 18 1, ,216.3 Derivatives Investments in associates 19 1, ,352.0 Property, plant and equipment 20 2, ,077.7 Intangible assets Deferred tax receivables Total non-current assets 5, ,181.0 Total assets 8, ,581.5 Shareholders equity and liabilities Trade accounts payable and other liabilities Current tax liabilities Financial liabilities Derivatives Provisions Deferred income and accrued expenses Total current liabilities ,089.2 Financial liabilities 23 1, ,604.0 Derivatives Pension liability Other liabilities Provisions 24 1, ,842.0 Deferred tax liabilities Total non-current liabilities 4, ,551.4 Total liabilities 5, ,640.6 Share capital Capital reserves Retained earnings 27 2, ,114.4 Other reserves Treasury shares Equity attributable to BKW shareholders 2, ,682.4 Equity attributable to non-controlling interests Total shareholders equity 2, ,940.9 Total shareholders equity and liabilities 8, ,581.5

19 GM 2017 INVITATION BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS 17 BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS Changes in Consolidated Equity CHF millions Share capital Capital reserves Retained earnings Treasury shares Other reserves Attributable to BKW shareholders Attributable to non-controlling interests Equity at , , ,525.0 Net profit Other comprehensive income Comprehensive income Dividend Transactions in treasury shares Share-based payments Acquisition of non-controlling interests Changes in the scope of consolidation Contribution to equity from non-controlling interests Equity at , , ,576.0 Net profit Other comprehensive income Comprehensive income Dividend Transactions in treasury shares Share-based payments Acquisition of non-controlling interests Changes in the scope of consolidation Contribution to equity from non-controlling interests Change in liabilities relating to non-controlling interests Equity at , , ,940.9 Total

20 18 GM 2017 INVITATION BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS Consolidated Cash Flow Statement CHF millions Note Result before income taxes Adjustment for non-cash transactions Change in net working capital (excl. financial assets/liabilities and derivatives) Income taxes paid Other financial expenses/income Cash flow from operating activities Investments in property, plant and equipment Disposal of property, plant and equipment Acquisition of Group companies 6/ Disposals of Group companies Investments in associates Disposals of associates Investments in current and non-current financial assets Disposals of current and non-current financial assets Investments in intangible assets Disposals of intangible assets Interest received Dividends received Cash flow from investing activities Sale/purchase of treasury shares Acquisition of non-controlling interests Contribution to capital from non-controlling interests Increase in current and non-current financial liabilities Decrease in current and non-current financial liabilities Increase in other long-term liabilities Decrease in other long-term liabilities Interest paid Dividends paid Cash flow from financing activities Translation adjustments on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at start of reporting period Cash and cash equivalents at end of reporting period

21 GM 2017 INVITATION 19 Report of the statutory auditor on the consolidated financial statements Ernst & Young Ltd Schanzenstrasse 4a P. O. Box CH-3001 Berne Phone Fax To the General Meeting of BKW AG, Berne Berne, 14 March 2017 Statutory auditor s report on the audit of the consolidated financial statements Opinion We have audited the consolidated financial statements of BKW AG and its subsidiaries (the Group), which comprise the consolidated balance sheet as at 31 December 2016 and the consolidated income statement, conso lidated statement of comprehensive income, changes in consolidated equity and consolidated cash flow statement for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion the consolidated financial statements (pages 14 to 94) give a true and fair view of the consolidated financial position of the Group as at 31 December 2016, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law. Basis for opinion We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the Auditor s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most signifycance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor s responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstate ment of the consolidated financial statements. The results of our audit procedures, including the

22 20 GM 2017 INVITATION AUDITOR S REPORT procedures performed to address the matters below, provide the basis for our audit opinion on the consolidated financial statements. Classification and valuation of energy trading contracts Risk As disclosed in the valuation principles in 4.1 Presentation of revenue and Energy derivatives, BKW enters into energy supply and purchase contracts with third parties. Depending on the motive for entering into these contracts, they either qualify as own-use transactions or as financial instruments (hedges or trading). This distinction between own-use transaction and financial instrument has far-reaching implications, since the former is not recognized on the balance sheet and recorded as energy procurement and revenue on a gross basis, while the latter is recorded at fair value at each balance sheet date and income resulting therefrom is presented net under revenue. BKW has defined clear rules for categorizing, measuring and recognizing contracts on the balance sheet. Our audit response Our audit procedures based on internal controls and included interviews with the persons responsible to confirm that there were no reclassifications of contracts initially classified as own-use transactions or financial instruments, and that no accounting approaches were therefore changed contrary to the original motive of the contract. Furthermore, we tested the existing internal controls with regard to the re - conciliation of the contracts entered into with counterparties and assessed these controls on the basis of representative samples. At year end, we involved our valuation specialists in performing sample testing to assess balance sheet recognition of the contracts qualifying as financial instruments. Valuation of nuclear provision Risk BKW operates the Mühleberg nuclear power plant and is obliged by legal provisions to pay for the future decommissioning of the power plant and the disposal of its nuclear waste. As it is material, this provision is a key element of our audit. As described in Note 5.2, every five years an updated study is prepared which is subsequently assessed by the Swiss Federal Nuclear Safety Inspectorate (ENSI). In accordance with Note 24, the provisions are adjusted for every reassessment as well as in each business year using this cost estimate. Our audit response To assess the provision, among other things we gained an understanding of the different assumptions and of the recorded amounts, and compared them with the calculations and records of BKW. In addition, we compared the recorded amounts with the cost study prepared in 2016 and examined the cause and extent of the changes as well as of the estimate adjustment based on internal and external documents of BKW. Moreover, we assessed the recording of the adjustments.

23 GM 2017 INVITATION AUDITOR S REPORT 21 Materiality and assessment of employee benefit plan obligation Risk BKW has its own pension fund, under which the risks of old age, death and invalidity are insured in accordance with the legal provisions. As described in Note 25 Employee benefits, these are material obligations that by law must be covered by plan assets in part or in full. The position is also very important for our audit work, because in calculating the employee benefit plan obligation, different assumptions are made that have a significant impact on the consolidated financial statements. Depending on the cause, changes of the employee benefit plan obligetion recorded in the balance sheet have to be recorded differently. Our audit response On the one hand, our audit procedures included tests regarding the complete consideration of all current and former employees in the employee benefit plan obligation. On the other hand, we compared, among other things, actuarial assumptions with our internal instructions and external sources. Moreover, we assessed the actuary s calculations as well as their competency, skills and objectivity to be able to include their work in our audit. We also tested the fair value of plan assets using available market data and valuation methods used. Finally, we evaluated the recognition of the changes in the Group s consolidated financial statements. Valuation of onerous contracts (price curves Risk According to the list of shareholdings, BKW holds investments in various associates. With regard to the so-called partner power plants, BKW has committed to purchasing energy at production costs plus a margin. Depending on the cost structure of the partner power plant as well as the current and expected development of prices, this can result in an onerous contract. BKW does not recognize such losses as an impairment on the investment itself, but records a provision under Onerous contracts energy procurement in accordance with Note 24. As with impairment testing, various assumptions concerning future values are made in connection with onerous contracts; these assumptions are comparable with those made in impairment testing and can have a significant impact. In addition, the provisions for onerous contracts are also material. Our audit response Among other things, we talked with management about the process for identifying onerous contracts. To assess the calculation of the onerous contracts, we involved internal valuation specialists, who reviewed the calculation as well as the assumptions. The price curves were compared with external studies in this area, too.

24 22 GM 2017 INVITATION AUDITOR S REPORT Recognition of acquisitions Risk According to Note 6, BKW has acquired a number of companies in the current business year. Acquisitions are complex transactions, as they include fair value measurement of assets and liabilities, incl. intangible assets that have previously not been recognized on the balance sheet. Various transactions involve so-called earn-out models, for which purchase prices to be paid at a later date must also be estimated at the time of acquisition. Depending on the significance of the transaction, these valuations are performed by BKW or by involving external specialists. The residual value, in the form of the difference between purchase price and acquired net assets, is goodwill. This distinction is important, since goodwill is later not systematically amortized but only reviewed for impairment at least annually. Our audit response Our work included, among other things, comparing the purchase prices with the underlying contracts and, if applicable, taking into account earn-out payments expected at a later date. Based on the interim or annual financial statements, we evaluated the reconciliation of carrying amounts at fair values. With regard to material intangible assets in particular, we involved internal valuation specialists to evaluate this position in terms of completeness and valuation. Finally, we also assessed the disclosure of the newly acquired companies in Note 6. Other information in the annual report The Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements, the remuneration report and our auditor s reports thereon. Our opinion on the consolidated financial statements does not cover the other information in the annual report and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information in the annual report and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibility of the Board of Directors for the consolidated financial statements The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

25 GM 2017 INVITATION AUDITOR S REPORT 23 Auditor s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial state-ments is located at the website of EXPERTsuisse: This description forms part of our auditor s report. Report on other legal and regulatory requirements In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. Ernst & Young Ltd Roland Ruprecht Licensed audit expert (Auditor in charge) Philippe Wenger Licensed audit expert

26 24 GM 2017 INVITATION FINANCIAL STATEMENTS OF BKW AG Income Statement CHF millions Dividend income Interest income Other operating income Total earnings Interest expense Other financial expenses Other operating expenses Direct taxes Total expenses Net profit

27 GM 2017 INVITATION FINANCIAL STATEMENTS OF BKW AG 25 FINANCIAL STATEMENTS OF BKW AG Balance Sheet CHF millions Assets Cash and cash equivalents receivables with third parties with shareholdings Prepaid expenses and accrued income Total current assets Loans 1, ,440.9 Other financial assets with third parties Investments 1, ,494.5 Total non-current assets 2, ,947.1 Total assets 2, ,956.2 Liabilities Trade accounts payable with third parties with shareholdings Other current liabilities Deferred income and accrued expenses Total current liabilities Non-current interest-bearing liabilities Bonds 1, ,133.5 Loans payable Total non-current liabilities 1, ,412.6 Total liabilities 1, ,457.8 Share capital Statutory capital reserves Reserves from capital contributions Statutory retained earnings 1, ,155.0 Voluntary retained earnings Profit carried forward Net profit Unappropriated retained earnings Treasury shares Total shareholders equity 1, ,498.4 Total liabilities and shareholders equity 2, ,956.2